European Dividend Withholding Taxes: Less with ETF or direct holding through 212 Pie?

Hi All,

I have a question about Dividend Withholding Taxes that I’ve been struggling to answer using google. Perhaps someone smarter than me on this forum can help!

Essentially say you hold 4% Nestle shares, every year they pay a dividend and 35% of that goes to Swiss Gov in taxation. So say their dividend is 10%, you are losing 3.5% of asset value every year to taxation, even if you pay no dividend tax in your home country (say in UK you are under £2K threshold).

Let’s say you find an Europe ESG ETF domiciled in Ireland that has a 4% holding in Nestle. Say you buy that, obviously you pay an expense fee to hold that ETF, say 0.5% a year. What about the dividend?

Does the ETF pay 35% tax on Nestle dividend every year and only receive 65% of it?

Or because the ETF based in Ireland and there is a preferential tax treaty between Ireland and Switzerland, is the DWT lower, say 10%, therefore ETF is receiving 90% of the dividend total?

And is this is the same for German and Spanish stocks too, so if you were to hold them in an Ireland-based ETF then you pay a reduced DWT of 10-15% instead of 20-25%?

Then, say your ETF is distributing and pays you a dividend, do the Irish gov charge a withholding tax on that dividend, or do you receive the full amount? If the Irish gov does charge a withholding tax, is it better to select an accumulating ETF instead?

Just trying to work out if an ireland domiciled ETF is better than creating a pie with a mixture of German/Swiss/Spanish stocks in it…

Many thanks,

Dividend withholding taxes all depend on your country and the country from where the dividends are paid. Each individual country has a tax treaty.

For example: I live in the Netherlands, when I get dividends from an American company normally 30% would be withhold. However The Netherlands has a tax treaty with the USA, with a W-8BEN form (which is automatically created by T212) I only pay 15% taxes on dividends.

So you have to look up what the tax treaty of your country states.

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Hi Chantal,

That’s exactly what my question is, what is the tax treaty between Ireland and various European countries? Does this mean that less tax is paid on dividends going to an Ireland-based ETF than straight to a shareholder in Europe (i.e. 35% in case of Nestle, a Swiss stock)?

Can’t seem to find the answers on google unfortunately!

It depends on the market where you buy the ETF. Most ETFs are based in Ireland, but traded in different countries. If I buy an ETF on Euronext Amsterdam, I will pay zero taxes on dividends. So the tax treaty between your country and the country where the market you bought applies.

To be honest I don’t get why you get Taxed on Income by companies that is aready Taxed when they get the Profits.

Double Taxation should be illegal imho since the Governments Tax you to death anyway.

Even worse with REITS since you need it to be in the ISA to avoid being Taxed on those as well of outside the ISA.

Hi Chantal,

I’m not sure you’ve understood my question, I was wondering about DWTs paid when the company the ETF is invested in pays its dividend to the ETF holding the company?

So if there as an ETF domiciled in Ireland that holds Nestle stock for instance, does it pay a 35% tax to receive the Nestle dividend (as a private foreign investor would) or is it less because of a tax treaty? (I can’t find this info online).

And does this mean it’s better to hold Nestle stock through an ETF domiciled in Ireland than as a direct investment as an investor because then you save tax on the Nestle dividend every year…?

Surely an individual stock is not comparable to an etf either way? A saving on an amount you will only receive a percentage of isn’t really a saving at all ie an etf will hold multiple companies so you are unlikely to receive the direct company dividends anyway it would be incorporated into the share price of the etf provider so not really apple’s and apples